Contributors

Friday, 29 January 2010

Burberry has won more than $1.5 million in a counterfeit court case against a New York-based importer and online seller. The British luxury brand had sought $6.5 million in damages, but a win is a win… Click here to read more at WWD.

Inter Parfums, the French maker of perfumes for Burberry, Lanvin and Van Cleef & Arpels, has forecast 2010 sales to rise 7 percent after a smaller fall last year than expected. This news comes after last week’s announcement that Inter Parfums has signed a perfume deal with Richemont’s luxury pen maker, Montblanc. Read more about both developments at Reuters.

High-end watchmaker Bulgari has decided to integrate the Gérald Genta and Daniel Roth collections with the Bulgari brand. This new alliance will be obvious on the new watch designs, where the Bulgari brand will be featured along with the Gérald Genta and Daniel Roth logos. Click here for more information in Bulgari’s press release.

Thursday, 28 January 2010

In our October 20 MO Down, we revealed the French Government’s plan to produce a rescue package to aid Paris’ couture artisans. This week, it has been confirmed a “fashion bank” will be created to lend money to struggling French fashion brands.

We believe this is an important government initiative, especially given that the lion's share of global luxury fashion, accessory and fine jewellery brands have a French history: including Louis Vuitton, CHANEL, Yves Saint Laurent, Lanvin and Christian Lacroix (sadly, no longer).

A recent Reuters’ article, Paris Haute Couture Learns To Make Do And Mend, discusses the economic shift in this industry. It suggested, “the feel-good factor of haute couture gowns is essential to the world's most expensive brands, helping them sell bags and perfume to the masses, but that formula seemed less certain as several houses faced deep losses and redundancies.”

This is something we’ve said before ourselves on the MO Down, haute couture helps to sell brands’ ready-to-wear lines, accessories, fragrance and beauty products, so it’s a very worthy investment.

Earlier this week, we reported that the Chinese spent more than the Russians, Japanese and US in France last year (see the MO Down for January 25). Now, the latest word is that HSBC has predicted that soon “the Chinese consumer will be the driving force for luxury goods.”

This HSBC report, as discussed in a Times Online article, also concluded that “the future is female” and described China as the “pick-me-up” for high-end brands after the financial crisis."

HSBC also said that "a new class of super-rich is developing whose spending preferences will exert a powerful influence on the wealth layers below them.” We’ve discussed this before in the MO Down, see A Peek Into Beijing’s Billionaire Playgrounds and Beijing Is Official Billionaire Central, and there is no denying the power of China’s super-rich. But how strong is that influence at the moment? We already had Tyler Brule, the editor of Monocle magazine, suggest that European luxury brands are “putting out products that Europeans wouldn’t touch” (see the MO Down for 21 December). Read too many trinkets, 'charms' and cutesy...

After better-than-expected holiday sales (see the MO Down for 15 January), Tiffany & Co. will raise its regular quarterly dividend by 3 cents to 20 cents and start buying back some of its stock again. Read more at CNBC.

Wednesday, 27 January 2010

The luxury watch industry has faced testing times in the Global Financial Crisis. But due to this hardship, Cartier has strived to be better than its competitors by creating an adjustment-free watch.

Traditionally, Swiss watches need to be regularly serviced at quite a high cost, so this new Cartier watch will be very attractive to customers. In fact, Cartier’s CEO, Bernard Fornas, sees “these innovations as the way to gain clients from rivals”, according to Bloomberg.

Cartier’s new prototype has put them in an “optimistic” mood, Fornas said, adding that the Asian market is “buoyant.” He also suggested, “Cartier could have as many as 65 shops in China within about four to five years compared with 30 now to tap demand from that country’s growing economy.”

With this new development, plus Swatch’s recent news of “a significant rebound (see January 22’s report),” we’ll be watching this industry closer for more signs of improvement.

Tuesday, 26 January 2010

Last October, we suggested that luxury brands should update their social networking status (see October 19’s blog) as 96 percent of the next generation of luxury consumers use social media. We are watching this evolution with interest and believe brands considering expanding into the virtual shopping space need to cover all the touch points of the total shopping experience.

An interesting Financial Times article (Fashion Expands Into The Virtual Market) explores this very issue, and discusses how Giorgio Armani set up a virtual Emporio Armani store in online role-playing game Second Life in 2007. It also reveals that a gamer on the virtual-world website Calypso bought a coat for his avatar that cost US $10,000 – in real currency. Astounding!

This type of branding, and direct connection with the consumer, seems to be vastly increasing. Susan Posen, Chairman of Zac Posen (and the fashion designer’s mother), is quoted in this article, saying, “There are people sitting at their desk on Wall Street and elsewhere who seem to be spending quite a substantial amount of time on this. It’s just a further evolvement of our voyeuristic world, an extension of Facebook and Twitter.”

The virtual fashion world will also be bolstered in March by the launch of the new Project Runway game for Nintendo Wii. Our question, however, is if these virtual sites are attracting more females and the average age is 35, what is the uptake from virtual sales to real sales? And does consumer experience (in terms of service) need to enter the equation at this virtual stage? Just some points to consider before taking the virtual plunge...

Monday, 25 January 2010

This is the new state of play for spending in France, according to a Global Refund study we read about in Reuters.

The survey revealed the Chinese were the big spenders at 155 million euros (AU $243 million); the Russians only spent 112 million euros (AU $176 million), and the Japanese were lagging behind at 99 million euros (AU $155 million). And US tourist spent a mere 64 million euros (AU $100 million).

With study findings like the above, it comes as no surprise that Hermes is keen to cash in on the luxury boom in China. Later this year, they plan to open a Chinese subsidiary, Shang Xia, which will sell furniture, clothes and household accessories.

According to Singapore’s Straits Times, Shang Xia will open its first store in Shanghai in the Spring, then a second store in Paris in the Autumn.

We can’t wait to see if this bold new strategy works for Hermes. Just last week, in our January 18 article, we reported that they are on a winning streak in Las Vegas, so it will be interesting to see if their luck continues…

Friday, 22 January 2010

A couple of early morning window shoppers keen for Salvatore Ferragamo's new season's stock hammered their way into the store to bundle up armloads of stock, mainly handbags and wallets, in an early morning break and enter.

According to a report in Melbourne's Herald Sun this morning, this is the second time Ferragamo has been targeted in less than a month.

Very often there is a pattern with these smash and grabs the general modus operandi is to smash windows or glass panelled entry doors. The learned thieves seem to know how long it takes to replace security glass or have security film applied from regular glass, and often strike again knowing regular glass has been installed as a temporary measure. There is also a tendency to move up or down the same street... so this is a call to other brands in Collins Street, check your gaps and be vigilant with your security. Even though with some brands January is markdown time, this is definitely not a good way to reduce inventory...

Fortune appears to be shining on the luxury industry this week. After celebratory news from Burberry, Richemont and Tiffany & Co. (click on the company names to see our earlier reports), there are also smiles on dials at Swatch due to a "significant rebound".

MarketWatch also said that Swatch had a "phenomenal record" month of December.

For last year as a whole, they reported a 6.3 percent fall in total gross sales, but said it was the third-best year for sales in the group's history.

A Swatch spokesperson said, "The last months of 2009 showed a very positive development, with clear signs of market normalization and increased consumer confidence. To some degree, the economic crisis [of] 2009 has separated the wheat from the chaff."

So despite hard times last year (see the MO Down for 17 August for a brief rundown), it seems like it’s now time to celebrate…

Prada confirmed to WWD that Francois Kress will be the new CEO of Prada USA. Click here for our earlier report on Kress.

Richemont is rumoured to be sizing up Rodenstock, a Munich-based eyeglass-frames maker, to purchase a majority stake. Both companies have declined to comment, and analysts are quashing this rumour as Rodenstock is “a totally different business” and has “nothing to do with luxury goods”. See Reuters for further speculation and debate.

Wednesday, 20 January 2010

The Borletti family are no strangers to the MO Down. We first mentioned them as potential buyers of Christian Lacroix (see our July 29 report), and now we’ve heard whispers from WWD that they are interested in acquiring Ittierre SpA.

The Borletti family are part owners of Italy's favourite department stores, Rinascente, and France's Printemps. Now, with the Ittierre bailout, we wonder if they are trying to build their profile to become a luxury and premium-end conglomerate, perhaps trying to rival LVMH and Richemont.

Let's hope this Italian group doesn't go the way of Prada when they started buying brands, Helmut Lang and Jil Sander namely, as it did quite honestly go pear shaped (or as you’d say in Italian: la pera ha modellato), with both brands being repurchased after business went downhill.

Anyway, that's another story as to the hows and whys of the acquisitions not working out. Needless to say we will watch with interest Borletti Group's future strategies.

All signs point to improvement in the luxury sector once again as Richemont, owner of luxury brands like Cartier and Montblanc, beat forecasts for sales over the Christmas period.

Due to booming sales in Asia, sales rose “2 percent in the third quarter at actual exchange rates, or 7 percent when stripping out currency fluctuations, to 1.585 billion euros ($2.29 billion)”, according to Reuters.

Tuesday, 19 January 2010

Recently we scrutinised promos from Chanel and Louis Vuitton (see January 8’s article), and now it’s time for Prada’s Spring/Summer 2010 menswear campaign to come under the MO Down microscope.

Click here to see footage of this campaign, produced by one of China’s most celebrated contemporary artists, Yang Fudong. This 9-minute film depicts Prada-clad models floating through the skies of 1930s Shanghai using umbrellas. Like Chanel’s YouTube promo, it is filmed in black and white.

We are impressed by this campaign so far. Prada are constantly innovating their art and cultural forays, which is spreading the word on the brand ever-so-subtly. We also think they are clever as they have chosen a celebrated historic Chinese artist, which will generate additional buy-in (a.k.a interest) from consumers. Click here for our prior comments on the benefits of luxury brands collaborating with famous artists.

Monday, 18 January 2010

The article discusses how Hermes is bucking the trend in Las Vegas by opening a new store. And sales have risen at their other Las Vegas store, at the Bellagio.

Hermes USA CEO Robert Chavez said, “Our business almost doubled in the city last year in the year of one of the worst recessions there has been in a long time. It is pretty incredible to see that type of result.”

Chavez also noted that people’s buying patterns have changed in a way that benefits Hermes. He said, “That is where that limited distribution and quality of craftsmanship we represent (benefits us). Instead of spending $200 and buying three things (at a store), they may say ‘I want one really nice $400 scarf at Hermes because I know it will be classic and last me season after season. I can give it to my daughter and she can give it to her daughter. I think there is a great appreciation for that type of thing.” Definitely true in our eyes.

It doesn’t seem like a match made in heaven, but Tamara Mellon has spoken and Jimmy Choo will be collaborating with Ugg Australia to produce five limited-edition sheepskin boots.

Mellon, Choo’s Founder and President, told WWD, “Ugg Australia is the only other footwear I have in my wardrobe,” which is a fantastic endorsement for this made-in-Oz brand.

Available later in the year, possibly October, these Jimmy Choo uggs will cost between US $595 to $795 (around AU $645 to $861).

So far the fashion world has been astounded by this partnership, with the Guardian asking, “When is a fashion marriage destined for divorce?” and also comparing it to Lindsay Lohan’s disastrous collaboration with Ungaro (click here for our article on that fiasco).

We are not sure about the success of this partnership either. However, we suspect it won’t create the sale stampede of Choo’s recent budget collaboration with H&M (read more about this in our November 17 article).

Customer service is always key for luxury brands. And it seems that in Canada, many brands are going to great lengths to court their customers…

An article in Canada’s The Globe And Mail, entitled Luxury Retailers Find New Ways To Woo The Well-Heeled, revealed that Hermes and Tiffany & Co. are fostering loyalty by presenting their customers with exclusive services. For example, a Hermes store in Toronto hired an engraver to personalise fragrance bottles with a customer’s initials, flowers or hearts. And Tiffany & Co. is said to be sending snail-mail notes, personalised e-mails and Facebook messages to customers.

Holt Renfrew, Canada's premier upscale retailer, also encourages repeat business with its “random acts of kindness” program, by sending flowers or theatre tickets to its top customers.

We like how Canadian luxury brands do business. We’ve always said it is essential for luxury brands to consistently convey the sincere message to their customers that ‘they are important’ and then do everything in their power to prove this fact. Click here to read more of our thoughts on this subject.

Friday, 15 January 2010

The holiday brought good cheer to Tiffany & Co. with the luxury jeweller announcing that sales rose after wealthy consumers started to spend more, according to Bloomberg.

The Wall Street Journal reported that Tiffany “raised its profit outlook for the year ending Jan. 31 from $2.07 to $2.12 a share from a previous projection of as much as $1.98 a share. Sales are expected to be $2.7 billion.” Click here to read more.

Breaking news on the Burberry front is that they have partnered with GQ.com and will release live footage of their Autumn/Winter 2010 Menswear fashion show in Milan on the GQ website on January 16.

The show will also be streamed simultaneously on live.Burberry.com. Click here for more details of Burberry’s clever use of web promotions. We visited the Burberry Live website and there is a countdown to the launch (which even counts the seconds!!). Plus, there’s links to their official website, Art of the Trench site, Facebook, Twitter, YouTube and so on.

According to UK research body Mintel, “customer publishing” is booming. What we mean by this is branded in-house magazines, like Chanel’s 31 Rue Cambon (see our November 23 update for a brief run-down).

An interesting article in the Financial Times probed this new trend, suggesting that “increasingly, luxury brands are introducing innovative editorial-style brochures and ‘look books’ for their clients.”

“Our research has shown that these magazines create an eight percent uptick in sales,” says Julia Hutchison, CEO of the UK’s Association of Publishing Agencies. “On average, every customer spends 25 minutes reading these titles. That’s 25 minutes spent with the brand. Lots of companies are redirecting their ad and marketing spends to this avenue.”

So, we could be seeing a lot more in-house magazines in the future. We believe it goes back to knowing the customer innately. And if brands are continuing to up their anti and investment on CRM [Customer Relationship Management], then who better to provide their own focused catalogues or advertisements to get their message across in their own managed environment.

Naturally, those who have confidence to produce their own magazine or mega-catalogue have a large business and successfully managed database. In fact, an Australian fine jewellery brand that has done this extremely well, and recently launched their first flagship retail store in King Street, Sydney, is AUTORE (AUTORE Magazine). AUTORE have a large international wholesale business and launched their magazine a few years ago, successfully showcasing their own products, extremely beautifully and subtly amongst other fashion and fine jewellery and interesting articles. Click here to view the AUTORE magazine.

Thursday, 14 January 2010

The internet is buzzing with the possibility that former UK Prime Minister Tony Blair may be negotiating a deal to work for Louis Vuitton or the wider LVMH.

The Huffington Post said that Blair was headed to Louis Vuitton, while Reuters UK suggested he would be an adviser to LVMH. Reuters also suggested Blair was a friend of LVMH boss Bernard Arnault.

To us, if there is truth to the rumour, it is not really surprising that Monsieur Arnault would target an internationally recognised, relatively diplomatic former leader like Blair. Let's face it, they lured Mikhail Gorbachev into one of their advertising campaigns a couple of years ago. Click here for a reminder of that campaign.

Louis Vuitton, as we often say, are a pioneering brand and therefore they are prepared to take risks and go where other brands are yet to think of going, or fear to tread. Certainly it would be both an impressive and slightly controversial appointment. Since LVMH is 'the biggest' luxury goods conglomerate globally, a former Prime Minister from a significant first world country/kingdom with business acumen and an international reputation is clever. As long as it is not the Blair Witch project!

They proved popular on Chanel’s spring 2010 catwalk and soon you’ll be able to wear Chanel’s temporary tattoos yourself.

The transfer tattoos, created by creative director Peter Philips, will be available in 55 different designs and packaged under the name of Les Trompe L'Oeil de Chanel.

They represent another surprising direction from Chanel, who raised eyebrows with their Bonnie and Clyde / grand theft auto theme for their YouTube promotion (see the MO Down for 8 January for more info).

Dr. James Hayward, President and CEO of APDN, said, "Premier brands are using DNA both to protect their brand and to offer customized products for individual customers. Proof of authenticity is a central tenet of brand integrity, and there is no better proof than DNA.”

We plan to keep tracking any DNA marker developments. But, meanwhile, we are still intrigued by the research study we discussed in December 8’s article: Counterfeiting: The Scary And Surprising Facts. This study, by Renee Richardson Gosline, revealed that buying counterfeit was a precursor to buying a genuine bag for 46 percent of those interviewed. Our final thoughts on this is that this percentage is very high, and one would need to really understand the methodology applied in order to interpret this result. So the MO jury is out on this research.

Tuesday, 12 January 2010

Prada is remaining tight-lipped about WWD’s recent report that Francois Kress is to be named President and CEO of their US arm.

We are particularly interested in this rumour since Francois Kress was the Managing Director for Louis Vuitton in Australia for approximately 2-3 years in the early naughties, prior to Mr Philip Corne, who is the current CEO of Louis Vuitton Oceania.

Mr Kress was a young and flamboyant character, a new and different energy for the role at the time, who quickly made an impression. So we wonder if Prada USA will be his crowning glory?

In the past, Prada has struggled to find and maintain CEOs in the US, an extremely important market for the brand, so we hope for all parties concerned that this is a match made in Prada heaven!

Don’t miss our earlier report on the departure of Prada’s last USA CEO, Graziano de Boni, late last year.

Monday, 11 January 2010

On August 3, we reported that sales of Italian luxury brand Bottega Veneta rose 2.7 percent in the first half of last year. Now, after reading an article in the Financial Times, we think we know their secret… staying true to their staff, heritage and craftsmanship.

Marco Bizzarri, CEO of Bottega Veneta, which is part of the Gucci Group, told the Financial Times while the company reduced the number of bags produced, they “didn't fire a single person in the entire company - so we kept the knowledge that is the most important key in our business."

Still on the subject of craftsmanship, Bizzarri said, "Bottega means atelier and Veneta is the region where it is made … so Bottega Veneta made in China doesn't make a lot of sense. If you want to have this kind of craftsmanship, you can't go abroad."

Bizzarri was also proud of the quality and timeless nature of the brand’s pieces, saying, “The customer has so many offers outside, and they come here for a reason; the reason is craftsmanship and quality - and this is what we should offer, even more than in the past." We wholeheartedly agree.

Friday, 8 January 2010

Click here to see Karl Lagerfeld’s new short film, Vol de Jour, for Chanel. And cast your vote on whether it’s thumbs up or down…

Our initial thought was that it was creative, with Chanel channelling a chic Bonnie and Clyde for their new promotion. Also, the ad being shown on YouTube is clever as it appeals to both the youth and art and cinéphiles.

However, after watching it a few times, we think it's quite strange that they are using theft in the new campaign, outlining how to steal from Chanel (D.I.Y style). In addition, they disrespect garments as they roughly toss a $10K+ dress and jacket into a shopping bag. We know they are focusing on the 'rebel' anti culture, and the stars (Lara Stone and Baptiste Giabiconi) are all dressed in Chanel, but our final verdict is that it’s bizarre. Other YouTube viewers have said much worse.

Louis Vuitton, on the other hand, is reverting to savoir-faire for their upcoming campaign, according to the Financial Times.

We expect the LV campaign will launch shortly in Australia. It's a clever campaign on the back of previous celebrity-charge efforts, featuring stars like Madonna. It will get back to the core of what the brand is all about – the grass roots, the artisan skills, in essence the savoir-faire...

The LV campaign reiterates the brand’s heritage, quality, rarity and quintessentially why Louis Vuitton is a lasting brand that is highly coveted. We can’t wait to see it!

Thursday, 7 January 2010

We had a feeling of déjà vu as The New York Post revealed that Prada is close to closing a deal to sell a third of the company to Swiss luxury group Compagnie Financière Richemont SA. As we recall, the exact same rumour was denied by Prada last August (see the July 3 MO Down for details).

Both Bloomberg and Reuters have reported that Prada is not in talks with Richemont. The official word is that Prada “categorically denies the sale of a stake to Richemont. There are no negotiations in existence." But we do wonder why this rumour has reared its head again…

Our answer? In reference to luxury goods, customer service has improved incredibly. And customers have been picking up some great discounted sales, but at the detriment to the stores' profit. Our take on heavy discounting has always been that it’s not the best marketing strategy, or the answer to securing long-term, sustainable and loyal business.

Locally, an article in The Australian reported that Myer’s December trade was affected by "very heavy discounting”.

We wonder if too much discounting is conditioning the consumer to only purchase at discount? Especially given Myer and premium-end department store David Jones are on-sale in some departments almost 350 days per year. Are retailers creating a consumer who will not pay 'full price' and will be loyal on discount only? Perhaps it will become a case of the stores ‘marking up’ initially to ‘mark down’ and still achieve their normal gross margins…?

For more of our thoughts on the discounting debate, click here to go to our July 14 article.

Monday, 4 January 2010

Happy New Year! We hope you had a luxurious break and enjoyed some bubbly on New Year’s Eve.

Speaking of champagne, we saw an interesting headline in the Telegraph: Recession Over? Champagne Sales Sparkle. It seems that in Britain, champagne sales have overflowed in the celebratory season. However, this sales jump was linked to “relentless price cutting and promotions engineered by supermarket chains”.

Business Week continued this topic with their article, French Welcome 2010 With Deep Champagne Discounts, which suggests the heavy discounting is damaging the champagne industry. French securities analyst Francis Pretre said, "We haven't seen such aggressive discounting since the big champagne crisis in 2000 [when prices fell after the millennium celebrations]. If it continues, it will create a real image problem for the champagne brand."

Burberry was 8th in line for the Footsie crown for 2009 due to “a rise of around 170 percent.” For more details on Burberry’s strong share performance, or to view the rest of the top 10, see the Independent.

Coach made the Forbes’ short list of America’s best companies. To make this list, the companies have to be “standouts in their industries, with consistent revenue and profit growth, respect for managing shareholder capital and a healthy earnings outlook.” Click here to read more at Forbes. Also, view our take on Coach in our July 20 report: Coach Is A Clear Winner In Tough Times.

Who's behind the MO DOWN

Melinda O’Rourke is the founder and Director of MO Luxury, a dynamic, Sydney-based management firm specialising in luxury brands and services. Melinda and her associates at MO work with local and international brands across prestige retail, fashion, fine jewellery, timepieces and specialised services. Melinda is well-connected, well-read, and well-versed in the demands of the luxury market and its client base. Her advice is firmly based in objectivity and ultimately, accountability. Melinda offers constructive counsel and both strategic and creative thinking and is able to draw upon a strong network of specialised talent to compliment the MO Luxury team as needed. Melinda enjoys excellent industry relationships and is regularly quoted in the business and fashion media. Read more about MO Luxury, www.moluxury.com.au